Market Overview

ALJ Regional Holdings, Inc. Announces Earnings For The Fourth Quarter And Year Ended September 30, 2018

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NEW YORK, Dec. 17, 2018 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) ("ALJ") announced results today for its fourth quarter and year ended September 30, 2018. 

ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. ("Faneuil"), Floors-N-More, LLC, dba Carpets N' More ("Carpets"), and Phoenix Color Corp. ("Phoenix").  Faneuil is a leading provider of call center services, back office operations, staffing services, and toll collection services to government and regulated commercial clients across the United States. Carpets is one of the largest floor covering retailers in Las Vegas, Nevada, and a provider of multiple products for the commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with two retail locations, as well as a stone and solid surface fabrication facility. Phoenix is a leading manufacturer of book components, educational materials and related products producing value-added components, heavily illustrated books and specialty commercial products using a broad spectrum of materials and decorative technologies.

Our financial statements reflect the operations of Faneuil, Carpets and Phoenix throughout all periods presented, Faneuil's customer management outsourcing business ("CMO Business") since May 2017, and Phoenix's acquisition of certain printing and manufacturing assets and liabilities ("Printing Components Business") since October 2017.

Investment Highlights – Three Months and Year Ended September 30, 2018

Consolidated Results for ALJ

  • ALJ recognized consolidated net revenue of $90.1 million for the three months ended September 30, 2018, an increase of $3.7 million, or 4.3%, compared to $86.3 million for the three months ended September 30, 2017 driven by the acquisition of the Printing Components Business by Phoenix, which accounted for $4.5 million of the total net revenue increase.  Excluding the impact of such acquisition, total net revenue decreased $0.8 million, or less than 1.0%, due to lower volumes in granite and cabinet sales at Carpets.  ALJ recognized consolidated net revenue of $89.7 million for the three months ended June 30, 2018.
  • ALJ recognized net income of $1.2 million and income per share of $0.03 (diluted) for the three months ended September 30, 2018, compared to net income of $13.8 million and earnings per share (EPS) of $0.37 (diluted) for the three months ended September 30, 2017.  Increased net revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix and higher start-up costs of certain contracts at Faneuil.  Additionally, net income for the three months ended September 30, 2017 reflects a non-recurring benefit from income taxes due to the reduction of deferred taxes valuation allowance.  Excluding such benefit from income taxes, ALJ recognized net income of $1.7 million and EPS of $0.04 (diluted) for the three months ended September 30, 2017.    ALJ recognized a net loss of $2.9 million and loss per share of $0.08 (diluted) for the three months ended June 30, 2018. 
  • ALJ recognized adjusted EBITDA of $9.3 million for the three months ended September 30, 2018, an increase of $1.5 million, or 18.5%, compared to $7.9 million for the three months ended September 30, 2017.  The increase was driven by the Printing Components Business acquisition by Phoenix, partially offset by planned volume reductions in packaging at Phoenix.  ALJ recognized adjusted EBITDA of $9.6 million for the three months ended June 30, 2018.
  • ALJ recognized consolidated net revenue of $369.8 million for the year ended September 30, 2018, an increase of $43.1 million, or 13.2%, compared to $326.7 million for the year ended September 30, 2017 due to the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $37.6 million of the total net revenue increase, and increases in business activity at Faneuil.  Excluding the impact of acquisitions, total net revenue increased $5.4 million, or 1.7%, mainly due to an increase of $8.0 million at Faneuil, partially offset by lower volume in granite and cabinet sales at Carpets, and planned volume reductions in packaging at Phoenix. 
  • ALJ recognized a net loss of $7.3 million and loss per share of $0.19 (diluted) for the year ended September 30, 2018, compared to net income of $15.7 million and earnings per share (EPS) of $0.43 (diluted) for the year ended September 30, 2017.  Increased net revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, a non-cash litigation loss at Faneuil, higher start-up costs of certain contracts at Faneuil, and higher selling, general and administrative costs due to increased depreciation and amortization expenses related to acquisitions.  Additionally, net (loss) income reflects an increased provision for income taxes to reflect a one-time, non-cash deferred income tax expense as a result of the Tax Cuts and Jobs Act of 2017 during the year ended September 30, 2018, and a non-recurring benefit from income taxes due to the reduction of the deferred taxes valuation allowance during the year ended September 30, 2017.  Excluding the one-time impact of deferred income taxes, ALJ recognized net loss of $3.2 million and loss per share of $0.09 (diluted) for the year ended September 30, 2018 and net income of $3.6 million and EPS of $0.10 (diluted) for the year ended September 30, 2017. 
  • ALJ recognized adjusted EBITDA of $33.1 million for the year ended September 30, 2018, an increase of $2.1 million, or 6.8%, compared to $31.0 million for the year ended September 30, 2017.  The increase was driven by the Printing Components Business acquisition by Phoenix, partially offset by higher labor, material, and customer service costs at Carpets, and planned volume reductions in packaging at Phoenix.  
  • ALJ estimates consolidated net revenue for the three months ending December 31, 2018 to be in the range of $85.9 million to $94.0 million, compared to $95.0 million for the three months ended December 31, 2017.

Jess Ravich, Executive Chairman of ALJ, said, "We are pleased that we were able to amend our existing term loan and revolving line of credit, which extends the maturity date until 2023 and allows for operational flexibility as we significantly invest in Faneuil's call centers.  During the fourth quarter, ALJ increased adjusted EBITDA and improved adjusted EBITDA margins.  We continue to focus on our strategic objectives to drive long-term shareholder value."



Three Months Ended
September 30,




Amounts in $000, except per share amounts


2018


2017


$ Change


% Change
















Net revenue


$

90,057


$

86,332


$

3,725



4.3%


Costs and expenses:














Cost of revenue



68,945



66,011



2,934



4.4%


Selling, general, and administrative expense



17,238



17,583



(345)



(2.0%)


Gain on disposal of assets, net



(104)





(104)



NM


Total operating expenses



86,079



83,594



2,485



3.0%


Operating inco

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